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Superfunds March 2016
contributions as this tends to be the quickest
way of getting additional revenue. It also largely
avoids the challenges of dealing with accrued
entitlements and expectations, particularly of
those who have already retired. There is nobody
more vocal than a self-funded retiree with
plenty of time on their hands and their financial
future under threat. They can make life very
uncomfortable for a local member of parliament.
The Treasury must consider that a change
to superannuation taxation is seriously under
consideration as they have started to scale back
their previously published estimates of the cost of
tax concessions for superannuation.
Assembling the tax expenditures statement
(TES) is not an easy task as there are both
conceptual and data issues. However, I have
been sceptical about tax expenditures statement
estimates in regard to superannuation for the
last decade or two. I hope that my harassing
of Treasury over the methodology and level of
estimates has had something to do with the
improvements that have been made, but there
may be more pragmatic reasons on the part of
Treasury.
Estimating a high figure for the tax concessions
can lead to an expectation that winding them
back liberates enough revenue to make other
changes, such as reducing personal marginal
tax rates.
Whatever the reasons are, the reality is that
Treasury has substantially revised downwards
previous estimates of the cost to government of
superannuation tax concessions. I would agree
that the use of a revised methodology has led
to an improvement in the accuracy of the TES
forecasts of this cost over the coming five years.
The tax expenditures figure on a tax foregone
basis are now estimated to be $29.8 billion in
2015/2016, down from an estimate of $33.5
billion in last year’s TES for the same year. The
revisions to later years are even greater, down
from an estimated $45.9 billion for 2017/2018 to
$32.2 billion.
The more accurate method for estimating tax
expenditures confirms that contribution caps
are working and that there is not a prospective
blowout in the cost of tax concessions for
superannuation as some (including the Grattan
Institute) have claimed. However, we are yet to
see a recantation of views by those who have
previously claimed that changes to the taxation
of superannuation are necessary because of the
supposed blowout in the cost of the concessions.
The cost of tax concessions for superannuation is
not overtaking the cost of the Age Pension and is
in fact helping to contain the future costs of the
Age Pension, while at the same time improving
the adequacy of retirement incomes.
ASFA considers that the actual cost of tax
concessions is more likely to be around $16
billion per year, just over a third of the current
annual cost of the Age Pension. As the most
recent TES notes, the estimates in that statement
are necessarily only a partial measure of the
impact of the budget of the tax concessions for
superannuation.
One other thing that we can be really sure
about is that more changes in regard to the
taxation of superannuation are likely to be
proposed by various commentators. ASFA will
continue to provide research and analysis to its
members and more broadly in order to support
an informed debate about the way forward.
Too often others have relied on myths and
assertions. The importance of superannuation
in delivering better retirement outcomes for
Australians, containing future expenditures
on the Age Pension and providing funds for
investment in the economy requires accurate and
relevant information. The improvement in the tax
expenditures statement is a helpful step in this
regard.
Do you have something to say about
this article? Let us know.
Email superfunds@superannuation.asn.au